Are Stock Options the Managers' Blessing? Stock Option Compensation and Institutional Controls
Stock option grants to top managers have largely contributed to the dramatic increase in US executive pay in recent years. In this paper it is argued that stock options, compared to other forms of compensation, have created strong incentives for managers to engage in lobbying activities for higher compensation. The empirical results presented for the S&P 500 firms and the years from 1992 to 1997 show that the relative success of such skimming activities is shaped by institutional controls. Stock option grants are substantially lower when control by the board of directors and the shareholders is higher, and competition on the product market of a firm is stronger.
|Date of creation:|
|Date of revision:|
|Contact details of provider:|| Postal: Schönberggasse 1, CH-8001 Zürich|
Phone: +41-1-634 21 37
Fax: +41-1-634 49 82
Web page: http://www.econ.uzh.ch/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lambert, Richard A. & Lanen, William N. & Larcker, David F., 1989. "Executive Stock Option Plans and Corporate Dividend Policy," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 24(04), pages 409-425, December.
- Murphy, Kevin J., 1999. "Executive compensation," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 38, pages 2485-2563 Elsevier.
- Conyon, Martin J & Murphy, Kevin J, 2000. "The Prince and the Pauper? CEO Pay in the United States and United Kingdom," Economic Journal, Royal Economic Society, vol. 110(467), pages F640-71, November.
- Brown, Charles & Medoff, James, 1989.
"The Employer Size-Wage Effect,"
Journal of Political Economy,
University of Chicago Press, vol. 97(5), pages 1027-59, October.
- Brian J. Hall & Jeffrey B. Liebman, 1998.
"Are CEOs Really Paid Like Bureaucrats?,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 113(3), pages 653-691.
- John M. Abowd & David S. Kaplan, 1999.
"Executive Compensation: Six Questions That Need Answering,"
Journal of Economic Perspectives,
American Economic Association, vol. 13(4), pages 145-168, Fall.
- John M. Abowd & David S. Kaplan, 1999. "Executive Compensation: Six Questions that Need Answering," NBER Working Papers 7124, National Bureau of Economic Research, Inc.
- Mehran, Hamid, 1995. "Executive compensation structure, ownership, and firm performance," Journal of Financial Economics, Elsevier, vol. 38(2), pages 163-184, June.
- Rafael La Porta & Florencio Lopez-deSilanes & Andrei Shleifer & Robert W. Vishny, 1999.
"Investor Protection and Corporate Valuation,"
NBER Working Papers
7403, National Bureau of Economic Research, Inc.
- Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, 1999. "Investor Protection and Corporate Valuation," Harvard Institute of Economic Research Working Papers 1882, Harvard - Institute of Economic Research.
- Benjamin E. Hermalin & Michael S. Weisbach, 2001.
"Boards of Directors as an Endogenously Determined Institution: A Survey of the Economic Literature,"
NBER Working Papers
8161, National Bureau of Economic Research, Inc.
- Benjamin E. Hermalin & Michael S. Weisbach, 2003. "Boards of directors as an endogenously determined institution: a survey of the economic literature," Economic Policy Review, Federal Reserve Bank of New York, issue Apr, pages 7-26.
- Conyon, Martin J. & He, Lerong, 2011. "Executive compensation and corporate governance in China," Journal of Corporate Finance, Elsevier, vol. 17(4), pages 1158-1175, September.
- Tichy, Gunther, 1990. "Die wissenschaftliche Aufarbeitung der Merger-Mania. Neue Erkenntnisse fur die Wettbewerbspolitik? (With English summary.)," Kyklos, Wiley Blackwell, vol. 43(3), pages 437-71.
- Brickley, James A. & Bhagat, Sanjai & Lease, Ronald C., 1985. "The impact of long-range managerial compensation plans on shareholder wealth," Journal of Accounting and Economics, Elsevier, vol. 7(1-3), pages 115-129, April.
- repec:fth:prinin:430 is not listed on IDEAS
- Brenner, Menachem & Sundaram, Rangarajan K. & Yermack, David, 2000.
"Altering the terms of executive stock options,"
Journal of Financial Economics,
Elsevier, vol. 57(1), pages 103-128, July.
- Menachem Brenner & Rangarajan K. Sundaram & David Yermack, 1998. "Altering the Terms of Executive Stock Options," New York University, Leonard N. Stern School Finance Department Working Paper Seires 98-010, New York University, Leonard N. Stern School of Business-.
- Jensen, Michael C & Murphy, Kevin J, 1990.
"Performance Pay and Top-Management Incentives,"
Journal of Political Economy,
University of Chicago Press, vol. 98(2), pages 225-64, April.
- Morck, Randall & Shleifer, Andrei & Vishny, Robert W., 1988. "Management ownership and market valuation : An empirical analysis," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 293-315, January.
- Shleifer, Andrei & Vishny, Robert W., 1986.
"Large Shareholders and Corporate Control,"
3606237, Harvard University Department of Economics.
- Chance, Don M. & Kumar, Raman & Todd, Rebecca B., 2000. "The 'repricing' of executive stock options," Journal of Financial Economics, Elsevier, vol. 57(1), pages 129-154, July.
- Sendhil Mullainathan & Marianne Bertrand, 2000. "Agents with and without Principals," American Economic Review, American Economic Association, vol. 90(2), pages 203-208, May.
- George W. Fenn & J. Nellie Liang, 1999. "Corporate payout policy and managerial stock incentives," Finance and Economics Discussion Series 1999-23, Board of Governors of the Federal Reserve System (U.S.).
When requesting a correction, please mention this item's handle: RePEc:zur:iewwpx:061. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marita Kieser)
If references are entirely missing, you can add them using this form.